Dow Jones Goes to War! (DIA)

A few weeks back we took a moment to talk with you about the findings of a woman in the food and nutrition space, a doctor called Natasha Campbell-McBride, whose writings on healthy gut flora are creating an earthquake in the world of diet and health.

We urged you then to take some time to acquaint yourself with her program and enlighten yourself regarding the wholesale lies you’ve been fed over the last half century regarding feeding, food and health.

We’re not going to get too more detailed at this point; just want to extend the significance of her research toward its impact on society at large and, of course, on markets.

Black white gun

In her book, Gut and Psychology Syndrome, Doctor Natasha makes the case that we’re all going crazy because of what we eat. Literally. She claims (quite convincingly) that poor gut health is responsible for nearly all the most common psychological ailments we face in the West today. And because much of our gut flora is inherited, we’re becoming less psychologically sound as a population with each passing year.

You are what you eat!

Your stomach and intestines are where 70% of your immune system is located. If your gut flora have been compromised, it goes without saying that you won’t be able to fight off any pathogen that comes your way.

But perhaps more importantly, 90% of your body’s serotonin is produced in your gut. Serotonin is a neurotransmitter that regulates everything from appetite to mood to sleep and relaxation. Proper brain function and behavior are inextricably linked to you having enough of this chemical in your brain. And very simply, if you’re not eating properly – if you’re eating according to the U.S. FDA’s ‘food pyramid’, a government sanctioned guide to ‘quality nutrition’ – you likely destroyed your gut bugs a long time ago.

food chart

And not only that.

But poor gut bugs only crave food that helps them reproduce, creating a twisted feedback loop that encourages a poor diet, that leads directly to a pathogenic multiplication frenzy in your abdomen and accelerates your descent toward depression, A.D.D., anxiety, obesity, Alzheimer’s, etc. etc.

The general madness this has created (yes! the one you see daily all about you) has made America the number one drugged country on the planet (with Europe not far behind), with a full two thirds of the populace on full time prescription meds and almost 15% on anti-depressants, double the number in the year 2000!

What’s it mean for markets?

The rate at which the contagion is spreading means that unless we turn this ship around fast, the number of sick people roaming the countryside will very shortly reach epic proportions, and those operating in the investment sphere is going to increase at an even faster rate. Remember – the markets are already beholden to the craziest, psychopathic cohort on the planet.

For those interested in further reading, this article in Scientific American, and this one from Johns Hopkins Medicine offer more detail on the whole idea of your gut as a second brain. Read them, get educated, follow Doctor Natasha’s program for good gut health and STAY SANE.

The Market Picture and a New Day’s Trade

We’re going to show you a chart below of the Dow Jones Industrial Average for the entire term of the bull market that began in March of 2009. We pick the Dow not because it’s the most inclusive of the major indexes. Indeed, with just 30 member companies it’s the least representative. The NASDAQ Composite and S&P 500 are certainly better measures of the broad market’s performance.

That said, the Dow has headline status and is still perhaps the most widely quoted and watched indicator of the U.S. market going. Moreover, the Dow has performed almost tit for tat with the S&P 500 despite its smaller number of components, and relatively speaking has actually underperformed the other two markers by a slight margin.

But it’s in the technical realm where we see the most profound difference between the Dow and the broader indices. There, it becomes clear that the Dow is in a far weaker technical position than its peers. Should there be a breakdown in the Dow, we would view it as grave, and a likely ominous portent of things to come.

Have a look here –

djia

The chart’s salient technical feature is the long term trendline, which, as you can see, ran into trouble last summer. Since then, the index has again fallen below that marker a second time, though the latest dip was not as deep as the former, offering bulls some dim solace.

We repeat that both the NADAQ and S&P are on surer footing as their long term trendlines remain intact (not seen here). Neither has seen the penetration evidenced on the Dow’s chart above.

A Second Chink in the Armor

Bull trends tend to rise in three waves before correcting, just as bears fall in three waves. And while there’s seldom agreement among technicians on how to mark these waves, we’ve made our best efforts above, in red.

As you can see, the first wave lasted a year, the second a year and three months, and the last – the longest – carried for close to 48 months before breaking down. All of which would be considered outright bearish if the recent move off the February bottom hadn’t carried so high.

Have a look here –

djia full 2

With the break above the last retracement high at 18,000 and above the downsloping trendline, the bulls’ hopes are alive. So long as price can remain above 17,400 where all the long term moving averages currently reside, the battle is on. Any drop below 17,200, on the other hand, would likely prove fatal.

Bulls will only find insurance on a move above the former all-time high marker at 18,351.

Trade It!

Our expectation is for some turbulence here, as bulls and bears wage war for the future of the market. We’re therefore selling a strangle with strikes above and below current support and resistance levels – and buying a longer dated one at those same levels.

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Wall Street Elite recommends you consider selling the June 24th 183.50 CALL for $0.58 and the June 24th 172.50 PUT for $2.22, for a credit of $2.80. Then, buy the July 183 CALL for $1.25 and the July 172 PUT for $3.05. Total debit on the trade is $1.50.

 

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Wall Street Elite recommends you consider selling the June 24th 183.50 CALL for $0.58 and the June 24th 172.50 PUT for $2.22, for a credit of $2.80. Then, buy the July 183 CALL for $1.25 and the July 172 PUT for $3.05. Total debit on the trade is $1.50.

 

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With kind regards,

Hugh L. O’Haynew

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